Researchers Tackle Economics of Debt Repayment

Should medical students bypass primary care for more lucrative subspecialty careers so that they can better afford to repay student loans? The question is an important one considering that the nation's looming primary care shortage is on a collision course with escalating medical education debt levels.

More specifically, 86 percent of 2011 medical school graduates had education debt at graduation, and that debt averaged more than $161,000. Twenty-three percent of students with debt -- those who attended private medical schools -- graduated with outstanding loans of $250,000 or more.

The authors put the debt issue for newly minted physicians in perspective: "In the mid-1990s, very few indebted medical school graduates had education debt even approaching $162,000; for the class of 2011, this amount was the median."

story highlights

The United States faces a shortage of primary care physicians at the same time that medical education debt levels are escalating.

Many experts assume that medical students make specialty choices based on debt levels and bypass primary care for more lucrative subspecialties.

Researchers assessed the actual economics of loan repayment in the context of a physician's household income and expenses.

Authors concluded that primary care remains a viable choice for graduates with median levels of debt; those with high debt levels should consider additional debt repayment strategies.

The researchers said they used financial planning software and publically available data from federal and local agencies, real estate sources, and national organizations "to assess the actual economics of loan repayment in the context of a physician's household income and expenses to determine whether education debt level should affect specialty choice."

They concluded that primary care remains a financially viable career choice for medical school graduates with median levels of education debt; however, graduates pursuing primary care with higher debt levels need to consider additional strategies to support repayment.

Study Methods

Researchers analyzed 384 different financial scenarios for a fictional indebted family -- a physician, his or her spouse and two children -- and looked at the couple's finances during the course of a lifetime. The researchers' aim was to assess the physician's ability to repay education debt without incurring additional debt.

Authors tinkered with a number of elements in their various models, including debt levels of $150,000, $200,000, $250,000 and $300,000; 16 repayment plans; and three separate career tracks in two locations: Boston and Denver.

They considered various repayment scenarios for their fictitious physician, including participation in

debt forbearance (no payment due from the borrower but interest accrual during residency);

income-based repayment (the borrower's repayment is linked to his or her income);

federal loan forgiveness and repayment programs, such as the National Health Service Corps; and

public service loan forgiveness (the borrower's remaining loan balance is canceled after he or she has made monthly payments for 10 years while employed at a nonprofit organization).

Authors also modeled scenarios in which the physician participated in the standard 10-year loan repayment plan, as well as an extended 25-year loan repayment plan.

AAMC Tool Helps Analyze Repayment Scenarios

Need help sorting through medical education loan repayment details?

Check out an online tool offered by the Association of American Medical Colleges (AAMC). The Medloans Organizer and Calculator(www.aamc.org) was developed specifically for medical students and residents to provide a secure location to organize and track loans and calculate repayment plans using user-specific loan information.

Currently enrolled medical students, as well as graduates and medical school administrators of AAMC-member medical schools, enjoy free access to all features and functionalities of the tool after signing in with an AAMC username and password.

All site visitors have free access to limited features of the tool.

Making Sense of the Data

In an interview with AAFP News Now, corresponding author and AAMC Senior Education Analyst Jay Youngclaus, M.S., said that many experts assume that debt influences medical students' specialty choices, even though no definitive proof exists to back up that assertion.

"We tracked the future income and expenses of a physician household with two incomes to see how manageable repaying different debt levels would be" because we wanted to know if debt should play a defining role in decision making regarding specialty choice, said Youngclaus.

"Regardless of the degree to which education debt and/or income expectations influence specialty choice, medical students and new physicians should understand the long-term financial implications of their career choices," he added.

"Our study findings could be used by medical students considering primary care to help them consider their options on how to carefully and strategically repay their school loans. Hopefully, the study will help show those students they can pursue primary care -- if that is the right choice for them -- regardless of their debt level," said Youngclaus.

Questions to Ponder

Family physician John Wiecha, M.D., M.P.H., another of the study's four authors, serves as director of the Office of Medical Education at the Boston University School of Medicine. He is also assistant dean for academic affairs and an associate professor in the department of family medicine.

Wiecha said that even though the study data show that, theoretically, a medical student with above average debt could repay that debt, medical students and residents should go into such a situation "with their eyes wide open."

Wiecha listed questions that students or residents with high debt levels -- particularly those with debt of $250,000 or more -- should ask themselves.

Are you willing to enroll in a loan repayment program?

What are your chances of obtaining a National Health Service Corps slot?

Can you find an attractive loan repayment option from another payer, such as a hospital, community, state agency or private nonprofit organization?

Do you see yourself working part time, and if so, will a part-time salary support your repayment?

Do you have a partner, and if so, what is his or her debt situation?

Are you willing to engage in an income-based repayment or public-service loan forgiveness program?

Can you to commit to working for a nonprofit?

Are you flexible enough in your living plans that you can avoid areas of the country associated with a high cost of living?

Can you find a practice with high income potential?

Are you willing to pay back your loans during an extended period and thus incur much larger interest payments?

Wiecha's final point is no small one. According to the study, a student borrowing $250,000 with an extended 25-year repayment plan would face a total repayment amount of more than $750,000.

"These are not minor trade-offs and, for many people, might not be acceptable or affordable," said Weicha.

Indeed, study authors as a whole concluded that each repayment option had its own set of trade-offs.

The study is scheduled to appear in the Jan. 13 print issue of Academic Medicine.